The consumption function relates the consumption expenditure decisions of households to
Investment decisions of firms
The level of disposable income
Saving decisions of households
The nominal interest rate
Aggregate demand is the total demand for all goods and services in an economy from
All sectors including the rest of the world
The household sector
The household and government sectors
What is the marginal propensity to consume?
The ratio of the change in consumption expenditure to the change in disposable income
The percentage of income that is consumed
The percentage of income that is not saved
One minus the fraction of total disposable income that is saved
The Keynesian analysis of aggregate demand indicates that changes in the money supply
Have no effect on aggregate demand
Shift the aggregate demand curve in the opposite direction of the change in government spending
Shift the aggregate demand curve in the same direction as the change in government spending
Move the economy along the aggregate demand curve rather than shifting it
The central problem in Macro Economics is
Income and employment
Price and Output
Interest and Money
Unemployment
The aggregate demand curve is downward sloping because
A lower price level, holding the nominal quantity of money constant, leads to a larger quantity of money in real terms causes the interest rate to fall, and stimulates planned investment spending
A lower price level, holding the nominal quantity of money constant leads t a larger quantity of money in real terms, causes the interest rate to fall, and stimulates planned investment spending
A higher price level, holding the nominal quantity of money constant
A higher price level holding the nominal quantity of money change
The aggregate demand curve
The total quantity of an economy's intermediate goods demanded at all price levels
The total quantity of an economy's intermediate goods demand at a particular Price level
The total quantity of an economy's final goods and services demanded at a particular level.
The total quantity of an economy's final goods and services demanded at different price levels
As the MPS increases, the multiplier will:
Decrease
Increase
Either increase or decrease depending on the size of the change in investment
Remain constant
The accelerator theory of investment says that induced investment is determined by:
The rate of change of national income
The level of aggregate demand
Expectations
The level of national income
The Classical Theory assumed the existence of
Disguised unemployment
Full employment
Under-employment
